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Full text of ""The specie basis" : as related to industry and the currency"

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[No. 6.] 

"THE SPECIE BASKS," AS RELATED TO INDUSTRY 
AND THE CURRENCY. 



BY WILLIAM BKOWN. 



One of my correspondents, who was acquainted with the late Amasa 
Walker, writes me as follows : — " I think he (Mr. Walker) suspect- 
ed or was inwardly conscious of the defects of Political Eco- 
nomy as it stands, but he lacked nerve to expose them — perhaps 
he also lacked nerve to seek with diligence for the truth." I am 
struck with the remark. From all that I see and hear, the convic- 
tion is forcing itself upon my mind that there are not a few political 
economists who are beginning to lose faith in the current expositions 
of the science, and that there are even some who begin to suspect 
what they have themselves written on the subject. 

Hut though there may be here and there encouraging signs that a 
i'.'u earnest and thoughtful men are drawing towards the light, it is 
but too painfully evident that some of our recognised expounders of 
Political Economy, even in the great centres of thought and activity, 
are receding further and further from it. Witness the following 
from a recent number of the London Fortnightly Review. 

" The science of Political Economy, as we have it in England, may 

be defined as the science of business Some hold, and as 1 think 

hold justly, that, extraordinary as it may seem, these regular changes 
in the sun have rmich to do with the regular reeurrence of difficult 
times in the money market." So saith Mr. Walter Bagehot in an 
article on "The Postulates of English Politieal Economy." As- 
tounding discovery! The sun in the heavens bringing a money 
panic on London or New York ! One would hardly think that such 
a remarkable case of sunstroke or color blindness could have 
occurred in the foggy climate of England. Such " postulates " as 
these almost take away one's breath. Perhaps we may have, in the 
next revolution of the Fortnightly, an arraignment of the fixed stars, 
or of Saturn's ring, or of Jupiter's satellites, as the guilty sources of 
paper lies and inflation among the sons 01 men. Who knows but 
the recent transit of Venus has had something to do with the 
troubles down here among the legal tenders? Is it not possible that 
the persistent discount on this class of paper delusions may be attrib- 
uted to Venus having got a little off the square? A lunar or solar 
eclipse would be a splendid case to goto a Jury — or to Congress. 
Let the Fortnightly Review choose twelve men, good and true, who 
believe that a correct definition of' the science 01 Political Economy 
>l as they have it in England" is, that it is " the science of business," 
and let them take evidence as to whether "perturbations" in the 
heavenly bodies are the direct cause of "perturbations" in the 
"paper" market, or vice versa ; and then we may have the whole 
thing fairly advanced as a postulate or established as a principle in 
monetary science. Nothing could be more seemly than that thu 



2 

wise men of London, the "paper" centre of the financial world, 
should institute a search for the specie basis. They are largely 
accountable for the disappearance of the people's money from the 
hand of industry. Will they allow me to suggest that possibly 
Orion may have it stowed in his belt or under his feet. Could 
industry only have the assurance that its cash forms a sort of 
pedestal for the brilliant constellation, it might feel somewhat more 
satisfied than with the present hollow delusion of the specie basis. 
Let us have a Prospectus forthwith of the Bank of Orion placed 
upon the London Stock Exchange. We know the trouble is, 
that even at the Bank of England people sometimes want their 
money and occasionally venture to make a clamor for it. Let us 
transfer the people's money from both departments of the bank to 
the feet of Orion. There would be a specie basis for you, safe from 
all " runs " ! The idea is at once so startling, so novel, so intelli- 
gent, that I claim it as one of the postulates of " the science of 
business as they have it in England." And I am quite satisfied, if the 
thing could only be accomplished, that it would do less harm to 
industry than the present " postulates " as to the specie basis. The 
idea of relegating, to the heavenly bodies, our responsibility in the 
practical destruction of the people's money, is so fascinating, that one 
sinks down into the easy chair of financial tranquillity quite over- 
come with the delicious aroma which floats about " postulates " 
which not only at once relieve us from all care and fill our coffers to 
overflowing, but settle for ever the troublesome questions as to 
returns to specie payments, or the practical difficulty of finding the 
specie basis when foolish and suspicious people begin to clamor for 
it. I shall lay claim now to a joint occupancy of the first vacant 
chair of Political Economy. 

" Bank of England notes are not exactly coin," says Professor 
Jevons, in his recent work on Money and the Mechanism of Ex- 
change. No, not exactly. They are as far from coin as north is 
from south ; just as far as payment is from non-payment. They are 
the very opposite of coin. Coin accomplishes barter in and by 
itself; and it does so because it has labor value in it ; and the labor 
is transferred for the equivalent value acquired. But Bank of Eng- 
land notes are evidences of debt. They are proof to the holder (if he 
be a producer), and proof beyond all question, that those who issue 
them are fattening off his labor or his products ; that he has given 
toil and got no return ; that payment is suspended. That is " not 
exactly " the work of coin. Does it bear any resemblance to it 
at all? Goods may be transferred by any underhand method. But 
industry wants to be paid for its goods and labor. Surely the bolder 
needs no other evidence than the five pound note in his pocket that 
the Bank has got his money or his toil, and that he has got the Bank's 
paper ; that the Bank has his capital in hand and is reaping from its 
employment ; and that he can never get the same value in exchange 
for that paper which he passes away and for the use of which, or 
rather for the time he holds it in possession, he pays out of his own 
toil, as if he used his own money, true money, in payment of the 
things he buys. 

Another postulate, this time from the American continent, has just 
turned up. Mr. H. C. Baird lays it down in the Atlantic Monthly for 
March (1876) in an article on " Money and its Substitutes." Here it 
is : " Value being a measure of the resistance to be overcome in get- 
ting possession of anything, the paper money issued by a responsible 



government, like that of the United States or Great Britain, for com- 
modities or Bervicea received, would represent and indeed embody 
value in such an eminent degree, that it would closely approximate 
in this respect to money of inherent value equal to its face." Now 1 
defy any one who is not a lunatic on the subjects of value and money 
to swallow such a dose as this. The oidy interpretation which the 
passage will hear is this — that value has been imparted to the " paper 
money'' because a certain resistance had to be overcome in taking 
the money out of the people's hands. But if Mr. Baird means to set 
forth the "well known fact that labor has to be given, or resistance 
to be overcome, by muscular toil, before people can get their 
money or their goods; and that therefore responsible or any other 
governments can impart value to bits of paper in such an eminent 
degree as that they shall closely approximate in that respect to a pro- 
duct of toil, then I confess I am blind enough not to perceive the 
connection. And Mr. Baird wdl pardon me when I say that there is 
not the remotest industrial connection between the two things. The 
article is a plea for more paper for the American people ; and though, 
as appears to me, it is a signal failure in that respect, and abounds 
with propositions which no true economist can for a moment enter- 
tain ; yet, on the other hand, it is a damaging statement of what is 
popularly known as the specie basis. The sentence " money of inher- 
ent value equal to its face " is quite beyond my comprehension. 1 
have always uuderstood that, practically, value is a relative term, 
having reference to some other article owning an equivalent amount 
of labor. Mr. Baird says, and says truly, " Under the British credit 
system some $115,000,000 or a little over, of specie is made to serve 
as a so-called 'basis' for $4,000,000,000 of bank circulation and 
deposits." So that, even if the money were the property of the 
banks — if they had given labor to the people for it instead of bits of 
paper — it would still be a complete delusion to call it a basis of any 
kind for the huge mountain of paper by which u business " is trans- 
acted and industry ruined. 

But, seriously speaking, who are we deceiving by all this course of 
conduct? It is painfully evident that many writers of undoubted 
ability are unconsciously engaged in the propagation of the most 
vulgar and dangerous errors. I say unconsciously — for I have hope 
that these gentlemen, when they have laid hold of the fundamental 
truths of Political Economy in the right way, will consecrate their 
talents to the propagation of those principles which they now labor 
to destroy. It is hard to say to what extent we are deceiving the 
working men, the producers. They, poor simple souls, never look 
into the matter at all. They have not the least suspicion that so 
great a wrong is done to them. They confide in what they consider 
the integrity of the system which is working their ruin. I fear we 
are but deceiving our own selves, and it is a terrible thing indeed 
when a deceived heart turns us aside. 

A correct " postulate " of the science of Political Economy as they 
have it in England would be — the science of destroying money, or 
of constantly suspending payment — of escaping productive toil — of 
living off the unrequited labor of others — and of effecting the ruin of 
industry. 

What is the convertibility of paper currency ? It has been buried 
under so many fine commercial phrases that it is no wonder the 
paper men themselves are continually wrangling over the subject. 
An individual, a bank, a corporation, or a government, gets hold of 



the money of industry in exchange for bits of paper. Industry does 
not in this way part with its money willingly. Through the inter- 
vention of the men of " business," it parts with it unwittingly or 
ignorantly. It delivers it up unconscious of the fact that paper can 
never be received in exchange for the products of toil without oppres- 
sion of toil. It matters little whether this is done by force or guile. 
It would not be so bad were it done by the former method. The 
restitution of this money, when restitution can be had — the return- 
ing to industry of that which it has slowly and laboriously produced — 
the giving back to labor of that which is its own, is dubbed in com- 
mercial phrase, "the convertibility of the currency"! It is a mis- 
nomer and a deception. Convertibility is that which is susceptible 
of change. There is no change in the bit of paper. It has not been 
converted into gold. There is no exchange or barter, in the true 
sense of the term, in handing over a bit of paper for solid gold — no 
exchange of value for value as when two workmen mutually transfer 
the products of their handiwork. A moment's reflection will shew 
that there can be no equivalence between gold and engraved pieces 
of paper. To hold that a paper promise to pay gold is a representa- 
tive of gold, is to hold that my obligation to pay for the thing I have 
purchased represents the thing purchased, which is absurd. For, 
the debt written or printed on the face of a slip of paper is different 
in no respect from any other debt, and all exchange is just simple 
barter, goods for money or money for goods. The issuer of the 
paper, in returning another's money, is doing nothing more than I 
do when I pay for my tea and sugar — indeed, not so much ; for I 
give value for value, but he only returns that which belongs to 
another. He has paid over to you the money which belongs to you, 
and you have returned to him the slip of paper, the written or printed 
evidence of his debt, that is all. 

But the paper men are not satisfied with taking the specie out of 
the hand of industry and lending it back to the producers for a prof- 
itable return of interest. Such a gross delusion could hardly be 
accomplished even with simple and unsuspecting industry. Modern 
banking is something far worse and far more destructive. It retains 
th* money, or permits it to fall into the hands of speculators and 
gamblers; or transmits it, as profit or safety demands, and for its 
own purposes, from one locality to another ; and then, deceiving 
itself and others by the specie basis phrase, issues an avalanche of 
paper currency, and discounts paper at the rate of about one hundred 
and fifty millions of dollars for every million of producers, the interest 
of which has all to be paid by these producers. Let any one estimate 
if he can, the enormous pressure brought to bear in this manner alone 
upon working men. That which is the " basis " of the system is not 
gold or silver, but millions of toiling human beings for ever crushed 
beneath this cruel and unrelenting power. Instead of a specie basis, 
it has a human basis of never-ending suffering and wrong. It can 
live and thrive and do its work without specie at all, as we have 
witnessed in the United States for several years past. It will be a 
dread awakening, will it not, when toil comes to realize the stupen- 
dous fraud. 

The conductors of the American daily press are, on the whole, 

acute enough to perceive that it is hardly within the province of 

reason to call a bit of paper a dollar. They have generally held up 

to scorn the idea of stamping a morsel of paper with the phrase, 

'This is a dollar." But here they stop short. They fail to perceive, 



or at least they fail to toll, that it matters little to that world of toil 
From whence nil our resources come, whether the system of univer- 
sal suspension of payment is accomplished by greenbacks, or national 
hank notes, or by treasury notes, or tl promises " to pay, or is con 
cealed under the thin disguise of a specie basis. They tell us that the 
bit of paper is nothing. Well, take away the paper and what have 
we left? Anything that industry lias produced? Anything that it 
can buy or sell? Anything on which it can lay its hand? 

Of course the men of Loudon who handle in one day the accumu- 
lated transactions of the industrial world: and, on the back of that, 
the fabulous amounts of share and stockjobbing and. other forms of 
speculation and gambling ; and, on the back of thatagain, the whole 
of these " transactions " repeated four or five or six times ere they 
arrive at the central point, the Clearing House, for adjustment — 
these men, f say, are careful, very careful, to tell us that there is 
not enough of money in the world. And so, to put the thing right 
and to supplement the shortcomings of nature, and correct the 
designs of Providence, they issue an avalanche of promises to pay 
that which they tell us has no existauce ! Never was there a greater 
delusion foisted upon a credulous people. There is a superabundance 
of money in the world to perform, twice told if necessary, all the 
requisite and legitimate transactions of industry. Every economist 
ought to know that there is no special or determinate amount of 
money needed for the world's exchanges. There never can be too 
much — there never can be too little. Through price, it has a self- 
regulating power, which never can be destroyed, if people will but 
let it do its own work. The labor embodied in it at the mine is the 
one thing needed to secure at once its value and its volume. 

Money is simply a commodity, just like any other commodit}^. It 
is more frequently bought than other commodities, that is all. Its 
use does not destroy barter, it rather intensifies it. It is no more an 
instrument of exchange than corn is an instrument of exchange. It 
carries labor in its hand — that it exchanges, nothing else. It is not 
an instrument of exchanging anything outside of itself. You can 
get things you want quicker into your possession by having this 
commodity to give, than if you had it not to give. These and other 
interesting points as to money, I have fully set forth in previous 
papers. 

Nothing is more common than to hear what is understood by the 
convertibility of the currency urged as an excuse for the use of 
paper. It is constantly said that you can go to -the bank and 
exchange the paper for specie. Be it so. Would any man who 
has given even ordinary attention to the subject, advance a simple 
fact like this in justification of paper currency and its attendant 
evils ? For, what is the fact ? In seeking for payment at the 
bank, you are only asking for what is your own. You have the 
bank's paper, and it is plain that the bank owes you money. You are 
but asking for payment of labor given or service rendered. You 
have given your toil, and certainly your money is due. The banks 
have got the people's money into their hands on a promise to return 
it when asked. They have got it without an industrial equivalent. 
Labor has given it away for bits of paper. Can we justify one or 
any of the ruinous effects of paper by the fact that an occasional call 
for money is promptly met ; or that, in a time of panic, a few lucky 
ones near the bank, or foremost in the crush, can get cash for the 
notes they hold. It may be of importance to gold speculators that 



6 

they should have the privilege of gambling with the people's money 
at pleasure. But what does it matter if a toiler, a worker, a producer, 
can occasionally on demand get the money for which he has 
wrought? Is it not those who toil who pay the enormous amounts 
drawn out of industry for the loan of this endless paper, and the 
strain of which is not lessened one iota by the fact that the banker 
may be able to return one genuine dollar for every five or ten or 
twenty or fifty fictions issued from a paper mill ? The thing called 
" Government," whatever that may mean, cannot manufacture 
money at will. It produces no commodity. It seems to me 
that the principal reason for its existence, as we now witness 
it, is that it can live off industry. At all events it would be 
a very different thing, and present very different features, if labor 
declined to feed and pamper it any longer with the enormous sums 
drawn out of heavily taxed toil. Government, as we know it, is 
only human influence localised; and it ought to develop itself, not 
as an instrument of crushing industry, but as the generous and 
faithful friend of humanity. In permitting the money of industry to 
be taken out of the hands of the producers, and in deceiving tlie 
people with all the absurd notions and legislation about a specie 
basis, Government is lending its powerful aid, not to build up, but 
to destroy the industry of the land. The laws of political economy 
are the same in Fiji and Honolulu as in Washington and London. 
And the great laws of exchange (which I suppose embrace what, 
Mr. Bagehot means by his " science of business") cannot be manip- 
ulated by either Caffre or Cockney. 

A word now to intelligent working-men. You must try and grasp 
this paper system as a whole. You must endeavof to understand it 
as the most extraordinary and compact development the world has 
ever seen of a vast and uncompromising system of industrial oppres- 
sion. You must perceive the special interest that this specie basis 
cry has for all who live from your labor. To the real producers, the 
working-men, it is a matter of really small importance. Specie 
basis or no specie basis, there would be no decrease of discounted 
paper, and that is one mighty instrument by which you are now 
oppressed. A little gold and silver afloat among the work- 
ing classes, as in England, will not prevent their downward 
progress in presence of that vast paper system which there exhibits 
unlimited power and complete concentration. You know how 
modern writers are fond of telling, and apparently as a matter 
of boasting, how the daily payments in London are said to be 
accomplished by the intervention of less than one per cent, of money. 
Once paper, you see, always paper and never-ending paper. It 
matters nothing to industry, I repeat, whether all this is done by 
greenbacks or other forms of legal tender, or by treasury notes, or 
promises to pay, or exchequer bills, or bonds of any kind, or even 
by bank cheques or by entries in bank books. The oppression to 
industry will be all the same ; for it is off industry that the whole 
system must live. I can easily perceive why the mercantile and 
certain other classes should strive to uphold the paper system. I 
can even perceive why the Church should dread investigation. But 
I can see no reason why millions of working-men should continue in 
bondage to ignorance as well as to oppression, 

I write this paper in the midst of a time of severe and persistent 
commercial distress. Mercantile firms of the highest standing are 
falling on every side. There is abounding and widespread sorrow. 



Tins terrible destroyer spares neither rich nor poor. All go through 
the furnace alike. One's sympathies are deeply stirred to sec old 
and honorable merchants going down in a common ruin. How 
many of them will now pause and see that this is indeed the 
finger of God? What does the reader think of this dark system 
ol* palpable unrighteousness? Can we for a moment doubt that 
its davs are numbered ? 



w 



70RKS ON THE LABOR AND MONEY 
QUESTIONS.— By William Brown. 



1. Thoughts on Paper Currency and Lending on Interest, as affect- 
ing the prosperity of Labor, Commerce and Manufactures : 
247 pages 75 cts. 

'2. A New Catechism on Political Economy : 68 pages 20 cts. 

3. No fund in Commerce or Labor for Lending on Interest: 11 

pages 10 cts. 

4. The Church, our Modern System of Commerce, and the fulfil- 

ment of Prophecy : 24 pages > 10 cts. 

5. The Claims of Capital considered: 36 pages 10 cts. 

6. The Specie Basis, as related to Industry and the Currency : 

7 pages 5 cts. 

Published by John Lovell, Montreal. 



Notk.— All letters, newspapers, reviews, &c, intended for the Author, 
are requested to be addressed to the caroot Mr. Lovell, as above. Friendly 
readers can reader important assistance by contributions, however small, 
in aid of the printing and circulation of these tracts.